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A blueprint for Canada’s energy policy

Reviews

When Ralph Nader called Gordon Laxer’s book After the Sands “a myth-destroying blockbuster” it couldn’t have been better put. This is a long-overdue insightful analysis of not only Canada’s oil and gas industry, but also the economic and political framework within which it operates. The study reveals that Canada does not have the right or the independence to determine its national energy policy. This was bargained away in the 1989 Free Trade Agreement (FTA) and further affirmed by Canada’s 1994 inclusion in the North American Free Trade Agreement or NAFTA.

Knowledgeable Canadians sometimes wonder why it is that Canada currently exports 73 percent of its oil production to the USA but then proceeds to import 40 percent of its oil largely for Quebec and the Atlantic provinces. Laxer explains that Canada is compelled to do this because of the “proportionality clause” in the NAFTA document. The proportionality clause stipulates that Canada must continue to export the same proportion of total “supply” that it has over the previous three years. Supply includes domestic output as well as Canada’s imports, and this applies to all forms of energy – oil, natural gas and electricity. If Canada should reduce the amount of energy it exports to the USA, it must also reduce the supply of that energy domestically to the same extent. It should be noted that although Mexico is a member of NAFTA, it refused to agree to the proportionality clause.

As Laxer points out, with this NAFTA provision it is not possible for Canada to ever cut off exports to the USA for purposes of conservation or in order to supply eastern Canada with our own oil and to stop foreign imports. At present Canada is committed to export 9 percent of its electricity, 50 percent of its natural gas, and over 70 percent of its oil. With NAFTA in force, Canada can never reduce these amounts of exports to the US, while on the other hand, our exports will keep increasing. To compound the problem, Canada has allowed most of its oil and gas industries to be foreign owned. No other country in the world has signed away to another country first access to its energy resources.

In addition to the production of conventional crude oil, since 1967 Alberta has been producing oil from bitumen, a heavy viscous form of crude oil found in huge deposits of rock and sand material in the northern part of the province. For years this was referred to as tar sands, but to improve its image the Alberta government and the oil industry since the mid-90s have been calling it oil sands. To avoid unnecessary controversy, Dr. Laxer has simply used the neutral term Sands.

Sands oil is expensive to produce and the procedure is highly polluting. The resulting greenhouse gases (GHGs) are the fastest growing source of climate change pollution in Canada. Despite this, Big Oil in Canada, almost totally foreign owned, is determined to expand Sands operations for export purposes but to do this it requires the construction of new pipelines. It had set its eyes on getting US approval for its Keystone XL pipeline that would have taken its oil to Texas refineries for export. However, to their amazement, because of the outcry by environmental opponents, the proposal was blocked by President Obama. Canada’s “petro-elites,” as Laxer calls them, have now redoubled their efforts at getting pipelines built to either the west coast or the east coast. For some time they have tried to get pipelines through British Columbia to either Kitimat or Vancouver. A more recent proposal is to convert TransCanada’s natural gas pipeline into a bitumen line for shipment to Montreal and then on to Saint John, New Brunswick. Because all these proposals are primarily for the purpose of exporting Sands oil and not for Canada’s domestic needs, they have ignited fierce resistance since people have begun to realize the environmental risks that would be involved.

In addition to NAFTA restrictions and inept government policies, Sands oil production presents a further problem for Canada. As Laxer says, “The business-as-usual scenario is for Sands output to rise as forecast, with Canadians continuing to use twice as much oil per person as Swedes and Britons. If so, forget the “dirty oil” label; Canada would become the world’s environmental rogue state.” There is no way that Canada could live up to its international commitments to reduce carbon emissions unless we phase out Canada’s carbon-fuel exporting role. If Canada would stop exporting its conventional oil and natural gas we would still have enough reserves to supply the entire country for the period of time necessary to transition Canada to a low-carbon conservation society. As for Sands oil, Canada doesn’t need it for its own purposes, and, to be environmentally responsible, we should not export it either. Given this, it should be possible to phase out Sands production in an orderly manner in about a fifteen year period.

To accomplish these objectives would require two courses of action. First, Canada would have to withdraw from NAFTA, and second, Canada would have to nationalize its oil and gas industries so these operations would be under public ownership.

NAFTA provisions would not allow Canada to stop its oil and gas exports to the USA or to supply all of Canada with its own conventional oil. To withdraw from NAFTA is a simple procedure – all that would be required is for Canada to give a six month notice of its intent. But to do this would require political courage! After withdrawing from NAFTA Canada could rely on the World Trade Organization (WTO) in conducting trade relations with the USA, which would perhaps be even more effective than the present restrictive NAFTA regulations.

The nationalization of the oil and gas industry would be required to allow Canada to stop exports to the USA and to supply all of Canada with its own conventional oil. As it is, the foreign-owned companies would not agree to such policies and could block all such endeavours, so the simplest procedure for Canada would be to take possession of its own resources and operations.

So as not to give away the whole show, Laxer’s last three chapters suggest a procedure by which we could nationalize our oil and gas industry and how we could phase out Sands oil production over an approximate fifteen year period. These chapters also explain what would be involved in Canada becoming a low-carbon conservation society. Hence, this is an added incentive to read the book!

If this book had been on the scene before my retirement as a professor, it would have been a major text in my energy and resources course. This is a book for the attention of a wide range of readers, especially government officials and members of all political parties. It should not only be read … its recommendations should be debated and presented to the Canadian public for consideration and public input. Most importantly, after this scrutiny, the Canadian government should act on the book’s recommendations . . . if it would have the political integrity and Canada’s interests at heart.

John Ryan, Ph.D., Retired Professor of Geography and Senior Scholar, University of Winnipeg.

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